SOCIAL SITES MAKE A KILLING

When virtual cash brings real gain

Singapore: By selling an array of virtual products from avatar clothes to e-furniture, Asia’s social networking sites appear to have solved the conundrum of how to leverage big profits from their extensive user bases.

It’s simple, they say, the money might be virtual but the profits are all too real. Chinese university student Tan Shengrong spends about 20 yuan ($2.90) per month purchasing outfits for her pet penguin avatar or playing games on QQ, an instant message portal on Qzone, China’s most popular social networking site.

It might not seem like a hefty sum, but every fen, or cent, is money in the bank for Tencent Holdings, which owns Qzone and saw an 85% increase in its second quarter net profit this year compared to 2008 despite the economic downturn.

From virtual clothes to epets, Asians spend an estimated $5 billion a year on virtual purchases via websites such as Qzone, Cyworld in South Korea and mobile-phone based network Gree in Japan, according to Plus Eight Star. That’s about 80% of the global market for virtual products, it says.

Of the virtual sales in Asia, about 80% comes from the sale of such items as equipment for online games such as rods for GREE’s fishing game Tsuri Star 2. The rest comes from purchases for avatars on networking sites.

East Asian societies are also very status conscious. Players are loath to be the only avatar without the latest gear and Asians are perhaps more willing than counterparts in the west to buy products to update their avatars or social space. REUTERS